Taxpayers lost at least £400million yesterday with the sale of bailed-out Northern Rock.

Sir Richard Branson’s Virgin group took over the bank which was nationalised four years ago amid amazing scenes of panicking savers queuing to withdraw their cash.

He has acquired only the ‘good’ bits of Northern Rock – its 75 branches with one million customers and their £14billion of mortgages and £16billion of savings.

Anxious customers queued up outside branches of the bank in 2007 to withdraw their deposits, echoing scenes not seen in Britain since the Depression

Two women walk past a branch of Northern Rock this morning after it emerged it had been sold to Virgin Money. The deal gives Virgin a presence on the High Street and in the mortgage market for the first time

The taxpayer is still liable for the ‘bad’, indebted parts of the bank kept afloat solely by a £21billion bailout.

More...

Virgin is forking out £747million, far below the £1.4billion of taxpayers’ money used to bail out Northern Rock. It is hoped, however, the final price tag will rise to £1billion if certain conditions are met, such as a stock market flotation.

The expected £400million loss is the equivalent of £13 for each of the nation’s 30.6million taxpayers.

Deal: Sir Richard Branson wanted to purchase Northern Rock four years ago when it first went into public hands

Yesterday George Osborne welcomed the sale, saying it was ‘an important first step in getting the British taxpayer out of the business of owning banks’. But the loss-making sale raises doubts about the chances of the taxpayer getting back its money from the much bigger bailouts of Royal Bank of Scotland and Lloyds.

Mark Field, a Tory MP, accused ministers of selling Northern Rock ‘for a song’, adding: ‘I’m very concerned about whether we are getting really good value as taxpayers for this.

‘Not only will Virgin not take on board the bad bank as part of this structure, but having put a cash injection of £1.4billion in four years ago, we’re now just receiving £747million.

‘I know that might go up a little bit, depending on performance, but there has to be a sense Sir Richard Branson has got this deal he was craving four years ago for a song today.’

Samuel Tombs, of the consultancy Capital Economics, said: ‘The unprofitable sale of Northern Rock should dent any hopes that the Government will be able to sell profitably its remaining stakes in the other nationalised banks in the near future.’

The Treasury insisted yesterday the sale was in the best interests of the taxpayer, not least in that it created a high street competitor for the big banks.

Virgin Money, founded in 1995, had been a relatively small operator lacking a branch network or current accounts. Experts said the bank rarely offered the best deal – its tax-free cash ISA pays a rate of just 0.1 per cent, compared with an industry average of 0.93 per cent.

And Jayne-Anne Gadhia, who will run the merged operation, has made no secret of her plans to charge for current accounts.

Yesterday Labour said serious thought should have gone into turning Northern Rock back into a building society owned by his members.

Chris Leslie, the shadow Treasury minister, said: ‘Making this sale today means we will face a loss so there have to be questions for the Chancellor as to whether selling later would have led to a smaller loss or even a profit.’

A Government source said: ‘We were
dealt a shocking hand by Labour and have played it in the best possible
way – getting money back, securing jobs and a new entrant to the
market.’

In 2009 Gordon Brown said: ‘At the end of the day banks will be paying money to the British public, not the other way round.’

Under
the terms of the sale, Virgin Money has promised to move its
headquarters from Edinburgh to Newcastle, make no more compulsory
redundancies and to ‘retain, and in due course, extend’ its network of
branches.

It will also begin lending to small business.

FROM COLLAPSE TO BILLION-POUND SALE... WITHOUT EVER TURNING A PROFIT FOR THE TAXPAYER

January 2007:
Northern Rock superficially appears to be in rude health as it reports a
16.5 per cent increase in its annual profits, beating City forecasts.

July 2007:
The stock market goes through a period of volatility and banks begin to
stop lending to each other due to market fears over exposure to
potential losses on high-risk US mortgages.

August 2007:
Bank of England Governor Mervyn King is first alerted to potential
problems with Northern Rock. The bank's chairman, Matt Ridley, speaks to
Mr King about the possibility of a support operation and begins the
hunt for a possible buyer.

September 14 2007:
Northern Rock customers rush to branches to empty accounts after the
bank confirms it has agreed emergency funding from the Bank of England.
Northern Rock's share price plummets by more than 31 per cent in a day.

September 17 2007:
Chancellor Alistair Darling pledges that the Government will guarantee
all deposits lodged with the bank after its share price slides further.

October/November 2007:
Sir Richard Branson's Virgin Group confirms its interest in a potential
rescue of the bank. The bank names the consortium led by the Virgin
Group as its preferred bidder.

February 17 2008: The Government announces the nationalisation of Northern Rock.

March 2008:
The bank announces that more than 2,000 jobs are to go. It reveals
'around a third' of its 6,500 jobs will be cut by 2011, with most staff
leaving in the first year. Later in the month the bank releases annual
accounts showing it sunk to a £167.6million loss in the last year as it
incurred costs in the battle to fight off nationalisation.

August 2008:
The Government takes further steps to shore up Northern Rock's balance
sheet after the lender unveils half-year losses of almost £600 million.
Treasury officials are providing up to £3billion of extra share capital
for the bank to help it cope with increased housing market uncertainty.

September 18 2008:
Official figures reveal the impact of the nationalisation of Northern
Rock on public finances. The bank added £87billion to the public debt,
pushing net debt as a proportion of output to 43.3 per cent - in breach
of Gordon Brown's 'golden rule' on sustainable investment.

January 2009:
The Government announces it is putting back the deadline for Northern
Rock to repay its £26.9billion debt in a move designed to allow it to
keep more borrowers on its books and ease the credit crunch.

February 13 2009:
Former shareholders in Northern Rock fail in their High Court bid to
overturn a Government compensation scheme which they say will result in
their shares being valued at nothing.

March 2009:
A damning National Audit Office report says an under-prepared Treasury
failed to properly assess risks, carry out its own due diligence, or
challenge over-optimistic business plans after nationalising Northern
Rock.

August 4 2009:
Northern Rock announces a 24 per cent jump in half-year losses, posting
a pre-tax loss of £724.2million for the six months to June, and warns
rising unemployment could pile further pressure on its mortgage book.

April 13 2010:
The Financial Services Authority fines Northern Rock's former deputy
chief executive David Baker £504,000 and bans him from working in any
regulated activity for life after the watchdog found he misled
shareholders and analysts by quoting inaccurate data. The FSA also hands
a £140,000 fine to the bank's former managing credit director Richard
Barclay and bans him for failing to ensure the accuracy of the figures.

July 27 2010:
The FSA fines Northern Rock's former finance chief David Jones £320,000
and bans him from working in any regulated activity for the part he
played in the misreporting of the bank's mortgage arrears figures.

March 9 2011: Northern Rock announces a £232.4million pre-tax loss for 2010 but insists it is on the road to recovery.

June 15 2011:
Chancellor George Osborne announces that Northern Rock will be sold to
the private sector in a speech at London's Mansion House.

August 3 2011:
Northern Rock reports underlying losses of £78.8million in the six
months to June, but says it expects to make a profit during 2012.

November 17 2011: The Treasury announces that Virgin Money is to buy Northern Rock in a deal worth at least £747million.